External affairs minister S.M. Krishna met his Chinese counterpart Yang Jeichi and the national security leadership on Wednesday to improve bilateral ties after last month's boundary talks ended in a deadlock. China had insisted that India discuss the Arunachal swap formula.

Krishna, who inaugurated the Rs49-crore Indian Embassy in Beijing on Wednesday, had started his day by meeting Zhou Yongkong, a senior politburo member of the ruling Communist Party of China.

Even as Krishna was diplomatic, Yang pointed out that the Dalai Lama and the new Tibetan Prime Minister-in-exile Lapsong Sangey were indulging in anti-China activities. He demanded that India put an end to their activities.

Krishna responded by reiterating the Indian position that the Dalai Lama was a spiritual leader. He said India is striking a cautious note on the Tibetan situation and wants to stick to its previous stand that Tibet is part of China. India also reportedly said the Dalai Lama is an honoured guest and his activities were not political.

Beijing was also cold to New Delhi's suggestion that China should intervene in the Yiwu incident where two Indian traders are still facing a legal tangle, after being ill-treated in China. The traders had earlier met Krishna in Beijing to narrate their harrowing tale.

The call, ahead of a visit by the Chinese President Hu Jintao, was aimed at bridging the divide between the two Asian neighbours. However, the gap has only widened on key issues such as the boundary discussions. Krishna evaded questions on the issue only stating that "the boundary issue was a complex one".

Trade was another prickly area. "I brought up the subject of balancing the trade and expressed hope that pharmaceutical companies with be provided market access," Krishna said.